Two weeks ago I started a tale of two products by looking at two very different housing microfinance product concepts that came out of a product development workshop held in Mbarara, Uganda in 2007. I hypothesized that the difference between the two products could be explained more by the housing paradigms and philosphies held by the designers than by the market research data collected. The workshop was part of an initiative to forge partnerships between a Housing NGO and participating microfinance institutions. Two partnerships were indeed formed, one in Uganda and one in Kenya and the resulting products bore a very close resemblance to the ones developed at Mbarara. Having already looked at the broad differences between the products in a Tale of Two Products Part Two, there are also some notable differences in the partnership structures.
UGANDA
In Uganda, the Housing NGO and the MFI (which I am calling UMFI for this posting) launched a home improvement loan very similar to the flexible housing loan concept that was developed in the training workshop. The Housing NGO developed a market research process, which was implemented by UMFI staff. UMFI and the Housing NGO jointly developed a prototype product and did prototype testing in the field. The Housing NGO’s HMF manager was part of the prototype testing, but was essentially presented to the clients as a HMF consultant working with UMFI and not identified as a Housing NGO staff.
After the HMF product was finalized, the Housing NGO provided wholesale funding to UMFI to launch its housing microfinance portfolio. Promotional materials were also supported in part by the Housing NGO, but the product was branded solely as a UMFI product. The Housing NGO’s name and logo were not identified with the product to the clients or public. The Housing NGO's HMF manager provided institutional capacity building and worked with UMFI staff in implementing the product, but the Housing NGO did not have any role in the loan assessment, disbursement or collection processes and did not interact with UMFI clients directly except when monitoring progress. Even monitoring was undertaken without branding the Housing NGO’s involvement in the product to the clients.
UGANDA
In Uganda, the Housing NGO and the MFI (which I am calling UMFI for this posting) launched a home improvement loan very similar to the flexible housing loan concept that was developed in the training workshop. The Housing NGO developed a market research process, which was implemented by UMFI staff. UMFI and the Housing NGO jointly developed a prototype product and did prototype testing in the field. The Housing NGO’s HMF manager was part of the prototype testing, but was essentially presented to the clients as a HMF consultant working with UMFI and not identified as a Housing NGO staff.
After the HMF product was finalized, the Housing NGO provided wholesale funding to UMFI to launch its housing microfinance portfolio. Promotional materials were also supported in part by the Housing NGO, but the product was branded solely as a UMFI product. The Housing NGO’s name and logo were not identified with the product to the clients or public. The Housing NGO's HMF manager provided institutional capacity building and worked with UMFI staff in implementing the product, but the Housing NGO did not have any role in the loan assessment, disbursement or collection processes and did not interact with UMFI clients directly except when monitoring progress. Even monitoring was undertaken without branding the Housing NGO’s involvement in the product to the clients.
(click on graphic to enlarge)
KENYA
The Housing NGO’s Kenya process with its MFI partner (which we will call KMFI) was similar to that of their colleagues in Uganda in many aspects. The Housing NGO supported product development, marketing and offered wholesale funds to KMFI. A primary difference in developing the product and partnership was that the product was co-branded, bearing the names and logos of the Housing NGO and KMFI and that the Housing NGO staff were more directly involved in the market research.
Another key difference between the products was the housing components of the loans. While UMFI’s flexible housing loan emphasized client control of the housing component and had little to no construction technical assistance, the Construction Loan offered by KMFI included specific house design options and extensive construction technical support. This resulted in a differing partnership structure based on the premise that KMFI would handle the credit aspects of the loan, but the Kenya Housing NGO would directly provide housing support services to KMFI clients.
The Housing NGO would conduct training on the Construction Loan for KMFI clients at joint meetings with KMFI staff. KMFI clients were trained in the Housing NGO’s housing process and given tips on cost reduction strategies in house construction. The Housing NGO staff would also take part in client assessment visits and help clients decide on an appropriate housing solution. The Housing NGO would then provide on-site monitoring and supervision through the construction process, while KMFI would manage the credit aspects of the loan. The Housing NGO had put a ceiling on maximum loan amount that it would support for each HMF loan and in some cases KMFI added additional capital for clients who were approved for loans higher than what the Housing NGO would support.
(click on graphic to enlarge)
CONCLUSION
The basic product development process and institutional support given by the Housing NGO to its MFI partners in Uganda and Kenya was very similar with the exception of the product being co-branded in Kenya. The nature of the products, however, may have influenced how the Housing NGO would interact with the MFI and its clients once the product was launched. (Or perhaps housing paradigms and an underlying model for partnership influenced the nature of the products.) Direct interaction between the Kenyan Housing NGO staff and KMFI clients as an integral part of the loan process was the major factor differentiating it from the Uganda partnership model during implementation. The question would remain: Given the difference in products and partnership models, would there be a difference in performance?
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